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Natural Gas Market UpdateJohn Jicha - MGE Director - Energy Supply and TradingMadison Gas and Electric Company


Agenda• What a difference ten years can make

• Low prices

• Fundamental factors impacting the energy markets

• Where do we go from here?

1


Hurricane Katrina

2


New Orleans

3


NYMEX Natural Gas Futures

$0

$2

$4

$6

$8

$10

$12

$14

$16

Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05

$/D

th

Gas-Fired Generation

Hurricanes Katrina and Rita

Declining Production

4

Source: NYMEX


Fundamentals of 2005

• Supply • Demand

5

Industrial, 30%

Electric Power, 27%

Residential, 22%

Commercial, 14%

Other, 8%Associated,

4%

Offshore, 15%

Onshore, 59%

Shale, 5%

LNG Imports, 3%

Pipeline Imports, 14%

Source: EIA



$0

$2

$4

$6

$8

$10

$12

$14

$16

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

$/D

th

6

2007Peak LNG

ImportsShale

Revolution Winter 2011-2012warmest in 65 years

Source: NYMEX



$2.40

$2.50

$2.60

$2.70

$2.80

$2.90

$3.00

$3.10

$3.20

$3.30

1/2/2015 2/2/2015 3/2/2015 4/2/2015 5/2/2015 6/2/2015 7/2/2015 8/2/2015 9/2/2015

$/D

th

7

Source: NYMEX


Supply Fundamentals

8


Production and Imports

-2-10123456789

2013 2014 2015 201660626466687072747678808284

U.S. Natural Gas Production and Importsbillion cubic feet per day (Bcf/d)

Federal Gulf of Mexico production (right axis) U.S. non-Gulf of Mexico production (right axis) U.S. net imports (right axis)

Total marketed production (left axis) Marketed production forecast (left axis)

annual change (Bcf/d)

Source: Short-Term Energy Outlook, September 2015.

9


Rig Count

$0

$2

$4

$6

$8

$10

$12

$14

$16

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

$/D

th

# of

Rig

s

Natural Gas Rig Count Natural Gas Futures Price

10

Source: NYMEX and BakerHughes


Production by Type

0

5

10

15

20

25

30

35

40

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Trill

ion

Cub

ic F

eet (

Tcf)

Alaska Coalbed methane Tight gas Lower 48 Offshore Other Onshore Shale gas

11

Source: EIA


Map of Shale Basins

12


Shale Production by Basin

0

5

10

15

20

25

30

35

40

45

Bcf

/d

Marcellus (PA,WV,OH & NY)

Utica (OH, PA & WV)

Haynesville (LA & TX)

Eagle Ford (TX)

Fayetteville (AR)

Barnett (TX)

Woodford (OK)

Bakken (ND)

Antrim (MI, IN, & OH)

Rest of US 'shale'

13

Source: EIA


Shale Production

0

2

4

6

8

10

12

14

16

18

20

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Trill

ion

Cub

ic F

eet (

Tcf)

14

Source: EIA


EIA Storage Inventory

20


Demand Fundamentals

21


Consumption

22


Consumption Growth

4.83 4.65 4.20

3.00 3.23 3.610.61 0.81 1.63

5.878.23

9.38

7.71

9.6310.88

0

5

10

15

20

25

30

2005 2010 2015 2020 2025 2030 2035 2040

Trill

ion

Cub

ic F

eet (

Tcf)

Residential Commercial Transportation Electric power Industrial

23

Source: EIA


Changes in Power Generation

0

1

2

3

4

5

6

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Trill

ion

kilo

wat

t hou

rs

Petroleum & Other/Other Nuclear Coal Renewable Natural Gas

19% 28%

31%

24

Source: EIA


Net Pipeline Imports (Exports)

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2012 2014 2016 2018 2020 2022 2024

Trill

ion

Cub

ic F

eet (

Tcf)

2015 Outlook 2005 Outlook

26

Source: EIA


LNG Net Imports (Exports)

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2012 2014 2016 2018 2020 2022 2024

Trill

ion

Cub

ic F

eet (

Tcf)

2015 Outlook 2005 Outlook

27

Source: EIA


World LNG Prices

28

Source: FERC


LNG Export Terminals• Approved – Under Construction

Sabine Pass LNG – 2.76 Bcf/d

Cameron LNG – 1.7 Bcf/d

Freeport LNG – 1.8 Bcf/d

Cove Point LNG – 0.82 Bcf/d

Corpus Christi LNG – 2.14 Bcf/d

• Approved – Not Under Construction

Sabine Pass LNG – 1.40 Bcf/d

• Current Exports

ConocoPhillips, Kenai, AK Re-exports 13.3 Bcf per year or

about 0.036 Bcf/d to Japan

Freeport LNG, Freeport, TX Exports 2.66 Bcf per year or about

0.007 Bcf/d to Brazil

30


Outlook

31


Heating Degree Days

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

November December January February March

2013-20142014-2015Normal

32


El Niño• Could be among the top four strongest on record

• Last strong El Niño occurred in 1997-1998

• Weather Impacts

Warmer than normal

Drier than normal

• Limits the development and strengthening of tropical cyclones

33


El Niño

34


Winter 2015-2016 Forecast

NOAA (January-March) Farmer’s Almanac (January-March)

35


Future Prices

$2.50

$2.75

$3.00

$3.25

$3.50

$3.75

$4.00

$4.25

$4.50

$4.75

Oct

-15

Mar

-16

Aug

-16

Jan-

17Ju

n-17

Nov

-17

Apr

-18

Sep

-18

Feb-

19Ju

l-19

Dec

-19

May

-20

Oct

-20

Mar

-21

Aug

-21

Jan-

22Ju

n-22

Nov

-22

Apr

-23

Sep

-23

Feb-

24Ju

l-24

Dec

-24

May

-25

Oct

-25

Mar

-26

Aug

-26

Jan-

27Ju

n-27

Nov

-27

$/D

th

36


Key Takeaways• Demand growth expected to be 15+ Bcf/d

• Mid-continent 5-year gas demand growth driven by increases in natural gas-fired power generation capacity

• At current prices, supply will be flat to small growth year to year

• Changes in gas flows into the Midwest

• Prices will be relatively stable in the short-term

• Prices in the long-term may increase as increased demand potentially outpaces supply

37


On Demand Savings ProgramMatthew Matenaer P.E. - Senior Program ManagerFocus on Energy

FOCUS ON ENERGYON DEMAND SAVINGS PROGRAM

MADISON GAS AND ELECTRICMAJOR CUSTOMER COUNCIL MEETING

Matthew MatenaerProgram ManagerOctober 6, 2015

BACKGROUND

42

• National Governors Association Award• Intent of the ODS Program

– Short-term– Long-term

• Program Timeline– June 2015 to December 2016– Active Summertime Periods: June – September– On-Peak Periods: 10 a.m. – 9 p.m., Monday-Friday excluding holidays

CUSTOMER ELIGIBILITY CRITERIA

43

• MGE Demand customer of 20 kW+ (on-peak)– CG-2, CG-4, CG-6

• Target customers: – 150 kW +– Existing EMS– Ability to cycle

equipment or stagger start-up times

TARGETED CUSTOMER TYPES

44

• Healthcare• Cold Storage• Local Government• Retail• Commercial Office• Lodging• Industrial

45

ON-PEAK DEMAND SAVINGS METHODOLOGY

46


47


COMMON DEMAND LIMITING STRATEGIES

• HVAC pre-cooling and control sequencing• Float temperature set points• Set kW thresholds in EMS• Set lighting schedules based on space occupancy• Staggering equipment run times• Delay battery recharging• Compressor cycling

48

ELIGIBLE CUSTOMER INCENTIVES

• $10/on-peak kW shed per month– Example: 55 kW (June) x $10 + 50 kW (July) x $10 + 60 kW (August) x $10 +

70 kW (September) x $10 = $2,350

• $500 fee reimbursement for installation of pulse output signal provided by MGE

• $1500 co-pay for EMS – pulse output signal connection• 10% efficiency bonus for capital projects that qualify for Focus on

Energy on-peak kW savings– Example: Capital project for LED stairwell lighting eligible for $1500

incentive; when approved, $150 bonus added for enrollment in ODS

49

PARTICIPANT COST-REDUCTION IMPACT

• Scenario: CG-2 customer (200-1000 kW) saves 55, 50, 60, 70 kW for the months of June-Sept. Total economic benefit to ODS participant for 4-month participation period:

50

Utility/Program Cost-Savings Category Cost Savings

ODS Incentives ($10/kW/month) $2,350

On-peak Demand Savings (~$0.45/kW/day) $3,230

Customer Max Demand Savings* (~$0.10/kW/day) $1,930

Electricity Consumption Savings (base + peak ~$0.10/kWh) $930

Total Savings: $8,440

*Assuming max demand is set in summer, 12 months worth of savings

ADDITIONAL BENEFITS OF PARTICIPATION

• FREE value add to participants• Tracks demand savings and consumption

savings over time compared to the customized baseline

• Capable of push messaging to facilities staff• Tracks energy efficiency upgrade performance

through energy markers• Installation requirements:

– LAN Ethernet connection, power source near meter

51

ROLE OF TRADE ALLIES

• Leverage existing customer relationships with Trade Allies that perform ongoing maintenance of existing EMS

• Trade Ally responsible for identification and implementation of demand limiting strategies into customer EMS

• Trade Ally incentives: $100/kW (average annual)– Must be registered Trade Ally with Focus on Energy

52

CUSTOMER RECRUITMENT STRATEGY

• Recruitment Period– October 2015 - May 2016

• Ongoing collaboration with existing Focus on Energy non-residential program staff and MGE customer account representatives to identify ideal candidates

53

54

CONTACT ON DEMAND SAVINGS PROGRAM

Call: 855-754-0808

E-mail: [email protected]

Visit: www.focusonenergy.com/business/on-demand-savings

/FOCUSONENERGY


Community Energy ConversationsLynn Hobbie, Senior Vice President - Marketing and CommunicationsMadison Gas and Electric Company


Community Energy Conversations • Ten years ago, we held our first community energy

conversations.

Informed our Energy 2015 Plan

Increased wind energy

Grew our green pricing program

Discontinued coal at the downtown plant


• Our Energy World is Changing

We invite you to help MGE build a community energy company for the future.

With your help, MGE will create:

An energy plan that sets direction for the next 10 to 15 years for our energy supply mix and customer services.

A set of “next steps” programs, projects, and opportunities to work together with customers to move us in that direction.

Community Energy Conversations


Community Energy Conversations• We are seeking input.

We’ve created a Discussion Guide that explores opportunities and challenges in a world of evolving technology.

Inviting customers to read it and share feedback with us.


Community Energy Conversations• We are seeking input.

We’ve hired Justice and Sustainability Associates (JSA) to conduct in-person conversations.

Began with introductory meetings with various groups and stakeholders.

Holding 50 or more small group, deliberative conversations now and through fall.


Community Energy Conversations• Objectives

We want to take advantage of new technology and respond to our customers’ evolving needs and preferences.

We’ve identified the following objectives that, taken together, reflect the kind of energy company we want to be in the future to best serve our community with respect to rapidly changing technology.


Community Energy Conversations• Objectives

Objective 1: Provide our customers with options they want today and in the future.

Objective 2: Help our customers control their energy use and costs, which in turn will minimize the need for costly new electric generation and distribution systems.

Objective 3: Transition MGE to a more environmentally sustainable energy supply.

Objective 4: Provide a dynamic, integrated electric grid that supports a range of distributed and centralized energy technologies and reliable service to MGE customers at a reasonable cost.

Objective 5: Ensure that changing technology serves all customers equitably.


Community Energy Conversations• Lend your voice to this important conversation.

Visit mge.com/conversations where you can:

Read the Discussion Guide and related information

Send us your feedback via an online work sheet

Major Customer Community Energy Conversation

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